Marxist Cosmology and the Current World Crisis Essay

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1001-04
1 December 2016

Marxist Cosmology and the Current World Crisis

Marxist cosmology can definitely be related to the current world economic crisis. Its components, dialectical and historical materialism, has the capacity to elucidate the causes of this crisis. In the context of dialectical materialism, the current world economic crisis is in fact a power struggle between businesses and financial institutions and the average citizen. Historical materialism, meanwhile, would argue that this crisis was brought about by the irresponsible business practices of financial institutions and the real estate industries in the United States. Marxist Cosmology and the Current World Crisis

Marxist cosmology is composed of two philosophical frameworks – dialectical and historical materialism. Dialectical materialism operates on the premise that history is characterized with a never-ending class struggle. Historical materialism, meanwhile, is based on the belief that the present state of a given society can be explained and understood by studying its means of production. German philosopher and political economist Karl Marx argued that social unrest is a result of the conflict between the ruling class (the owners of the means of production) and the proletariat (the ordinary workers).

Given its aforementioned definition, Marxist cosmology can definitely be related to the current world economic crisis. Dialectical and historical materialism can elucidate the causes of this crisis. In the context of dialectical materialism, the current world economic crisis is in fact a power struggle between businesses and financial institutions and the average citizen. Historical materialism, meanwhile, would argue that this crisis was brought about by the irresponsible business practices of financial institutions and the real estate industries in the United States.

In the Name of Profit… According to Marx, profit is the driving force of production. The capitalist produces specific goods and services not because these are what the consumers need but because of their profitability. In Marxist economics, profit is known as the surplus value – money that is extracted from the laborers in the process of production. The capitalist deducts a certain amount from the worker’s wage and then adds it to the value of the commodity that the worker produced (Beams, 2008).

But as the field of enterprise became increasingly sophisticated, the amount of capital that was needed to set production in motion surpassed the capacity of individual capitalists. Capitalists, therefore, had no choice but to draw their capital from the resources of society as a whole. This became possible through the emergence of the credit and banking system and the joint-stock or shareholding companies. Although the money in these institutions belonged to other people, capitalists were able to borrow from them so that they can start their respective enterprises.

These loans were granted on the condition that the above-mentioned financial establishments would get a share of the capitalists’ profit in the form of interest payments (Beams, 2008). In the process, capitalists become powerful managers of other people’s money. The resources of numerous banks are placed at their disposal, allowing them to spend the money they borrowed the way they see fit. The banks from which they borrowed do not care as to how they spent the money, as long as they pay their loans on time and with the corresponding interest rates.

In the case of the joint stock company, the shareholders supply monetary capital in exchange for stocks and bonds that would serve as a title to property. Marx calls these stocks and bonds as “imaginary” or fictitious capital – they are mere titles to a share of the surplus value and do not give the owner a right to the portion of the company (Beams, 2008). …Stupidity Immense control over other people’s money gave unscrupulous entrepreneurs and financial institutions the idea that they can use the money that was merely entrusted to them even in shady investments.

This mentality was very evident in the Ponzi scheme and the subprime mortgage crisis (the prelude of the current world economic crisis). The Ponzi scheme is characterized with a “rob-Peter-to-pay-Paul” strategy (Wilson, 2008). The scammer collects money from new investors in order to pay the returns of the very first investors. As soon as the scammer returns all the money invested by the original investors, he or she simply takes the money invested by later investors and disappears (Wilson, 2008).

The subprime mortgage crisis, meanwhile, involved the selling of real estate properties even to those who cannot afford to pay for a house in order to make more profits. Realtors took advantage of the recent boom in the US real estate industry by selling as many houses as they can – whether or not the buyers are actually capable of paying. When foreclosures started pouring in as a result, real estate companies covered up their losses by borrowing from banks.

Despite prior knowledge that these firms will not be able to pay their loans, the banks still lent them money – the banks thought that they can cover up their losses by borrowing from financial institutions such as Lehman Brothers, Merrill Lynch, JPMorgan Chase and the American Investment Group (AIG) (Inquirer. net, 2008). The banks did manage to borrow money from these establishments, but were unable to settle their accounts with the latter. As a result, Lehman Brothers, Merrill Lynch, JPMorgan Chase and AIG were pushed to the brink of collapse – along with all the other firms that invested their money in them.

It was only a government bailout program (now known as the Emergency Economic Stabilization Act of 2008) that prevented this from happening. The subprime mortgage crisis eventually triggered an economic crisis in the US which had negative impacts that was felt around the world. Conclusion Marxist cosmology is indeed relatable to the issue of the world economic crisis. Dialectical materialism could clearly show that the major businesses and financial institutions in the US alienated themselves from the American public by squandering their money.

They thought that being entrusted with other people’s money gave them the right to spend it the way they saw fit, regardless of whether or not they were going to invest it in anomalous ventures. Historical materialism, on the other hand, pointed out that it is this irresponsibility on the part of American enterprises and financial institutions that caused the world economic crisis. Worse, every nation in the world has to suffer greatly for it.